By: Isabel de Saint Malo de Alvarado
Vice President of the Republic of Panama
Article published in „The Guardian“ on April 21, 2016

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A trove of leaked documents relating to offshore corporations with ties to the rich and famous has cast a light on the extent to which the world’s financial and corporate centers are vulnerable to abuse by those seeking to hide their wealth. The affair has unfairly come to be known as “The Panama Papers”, even though, as the documents show, tax evasion and financial crimes are global problems to which no nation is immune.

The more than 11 million documents contained in the leak show that the majority of corporations formed by Mossack Fonseca, a company headquartered in Panama and with affiliates around the world, are in reality incorporated in countries other than Panama.

While we must maintain a presumption of innocence, Panama recognizes our role and responsibility to fully investigate and penalize any illegal activities in full accordance with our laws. Such investigations are currently being carried out through the proper institutions in our country, and are aided by the fact that in recent years, particularly the last 20 months under President Juan Carlos Varela’s administration, Panama has strengthened our legal mechanisms regarding money laundering.

Yet we also know that this challenge not only goes beyond Panamá, but also beyond politics. The world must work together to fight the systemic challenge of tax evasion that globally deprives taxpayers of as much as $200 billion each year. That is why Panamá is setting up an independent commission co-chaired by the Nobel laureate Joseph Stiglitz, to evaluate our financial system, determine best practices, and recommend measures to strengthen global financial and legal transparency. We expect its findings within the next six months, and will share the results with the international community.

This step follows a spate of reforms in Panama aimed at promoting greater financial transparency. Since assuming office in 2014, President Varela implemented new “know your client” regulations and continues to develop a robust treaty network that allows the exchange of legal and corporate information.

What’s more, we have implemented legislation that allows the shareholders of all companies incorporated in Panama to be identified, and enacts stronger regulations for financial and corporate providers as well as key non-financial industries.

These reforms and others have been recognized and validated by the international community, including the Financial Action Task Force on Money Laundering, which cited Panama’s “significant progress” in combating money laundering when it removed us this year in record time from its “gray list.” We have also progressed positively in a peer review by the Organization for Economic Development’s Global Forum for Transparency and Exchange of Information for Tax Purposes.

The term “Panama Papers” is more than an unfair misnomer, it reflects a deeper misunderstanding of Panama’s financial system overall. As an international business hub, Panama treats foreign and domestic corporations the same. The notion that Panama is a “tax haven” for international corporations comes from the fact that we only tax income derived from Panama, not from outside. However, all transactions in Panama are taxable in accordance with the laws of relevant jurisdictions. Our government has strengthened our laws, but these policies can still be manipulated for illicit purposes.

Even with recent reforms, Panama remains committed to adopting more changes in order to comply with international transparency standards in a fair and competitive manner. Our government has reiterated on multiple occasions that we are fully and immediately committed to the implementation of bilateral automatic exchange of information consistent with the goals of the OECD’s Common Reporting Standards. Further, we are open and willing to engage in international dialogue with relevant technical teams to evaluate the specific multilateral mechanisms needed to implement these standards.

Additionally, we will continue to cooperate with the United Kingdom and other countries to prosecute offences that are outlawed in Panama, and continue to abide by the many international treaties we have ratified with our partners around the world.

Many forget that after years of being ruled by a dictatorship, Panama is now a stable democracy. Our efforts to transform our country into one of the premier economic hubs in the Western Hemisphere have resulted in the establishment of the regional headquarters of over 100 transnational corporations. It is our hope that through Panama’s reform efforts and increased international cooperation, our country will become even more attractive to multinational companies that seek to act as responsible global citizens.

Panama’s path to financial transparency is irreversible, but the march towards greater global financial transparency must be a collective one. Panama stands ready to play our part.

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